Ride-sharing rules up for vote from PUC

Phillip Zakhour, 49, is a single father in San Francisco who drives for TaskRabbit and SideCar. Ride-sharing services such as Lyft, SideCar and Uber oppose PUC proposals to regulate them as transportation companies. (JOHN GREEN/Staff photo)

When the state proposed a new set of transportation rules in July that would allow ride services such as Uber and Lyft to keep their cars on the road, ride-sharing companies in the Bay Area publicly welcomed them as a victory against regulators and taxi companies that had been trying to shut them down.

But at a hearing Thursday, the ride-sharing industry and regulators may revisit the argument from companies such as Uber that they are software -- not transportation -- services, making them exempt from the regulations put forward by the California Public Utilities Commission.

That argument illustrates the thorny issues raised by ride-sharing, a nascent industry that is growing in popularity in cities from San Francisco to Amsterdam but has come under criticism for circumventing regulations that taxi cabs and shuttle services follow. Even if the proposed rules are approved Thursday, the battles between Web- and mobile-based car services, cab fleets, public transit systems and regulators is far from over, according to industry experts and academics.

The regulations proposed by Commissioner Michael Peevey would require that Uber, Lyft, SideCar and similar on-demand ride services apply within 60 days for a license under a newly created transportation category. Companies must comply with several safety requirements, including $1 million in liability insurance, driver background checks, vehicle inspections and a zero-tolerance policy for drug and alcohol use by drivers.

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Many transportation professionals have agreed the safety rules are fair. But since conversations with regulators began in December, Uber and SideCar have rejected the state's authority to regulate them as transportation services, saying they are instead Internet companies that build mobile apps and websites to help people get rides.

SideCar, a donation-based ride service that uses nonprofessional drivers, said in public comments to the commission that the company "should not be regulated as if they are operating as a transportation" service. Then in later comments sent to the PUC in August, Sidecar warned the regulations "might undermine innovation and investment" in ride-sharing and requested more relaxed vehicle inspection and insurance requirements.

But in a statement to this newspaper, the company adopted a different tone, saying the company was "pleased with the proposed decision" and that it already meets most of the safety requirements.

Uber, a San Francisco company that dispatches black town cars, taxis and hybrids or small cars through a mobile app, argues it should be governed by federal telecommunications law. Even after praising commissioners in a July blog post, Uber told the PUC that "subjecting a technology company such as Uber to the commission's jurisdiction would chill the development of innovations" across the state. Uber says it is a software company and opposes giving the state information about revenue, cars or riders.

"That's just a very convenient argument," said John Attanucci, a lecturer at Massachusetts Institute of Technology and leading researcher on ride-sharing. "What they're really providing is a transportation service, and it just happens that the media that they're providing it on is the Internet rather than the phone."

Attanucci said ride-sharing companies have hijacked the term.

"They're using 'ride-sharing' because they don't want to be called a taxi or a shuttle van," he said.

Uber declined to comment for this story. Lyft did not respond to questions.

State law defines a charter-party carrier as "every person engaged in the transportation of persons by motor vehicle for compensation, whether in common or contract carriage, over any public highway in this state." The PUC said it found the argument from Uber and SideCar "to be factually and legally flawed."

The commission said that UberX, the company's fleet of small and hybrid cars, would be subject to the new regulations, but commissioners will decide in a later vote whether Uber's black car service should be regulated by existing rules also used for town cars and limousines.

But Charley Moore, founder and chairman of San Francisco-based online legal services company Rocket Lawyer, said Uber's argument may have merit because ride-sharing apps are global.

"There are questions about jurisdiction," he said. "These are not local companies. Transportation was initially a city-state function, but innovation has outpaced that."

He expects Uber will continue to fight regulators and taxi companies, and the company has the cash to pay the attorneys and lobbyists to do the work. Some estimates peg Uber's worth at $3.5 billion. Google (GOOG) Ventures -- which also helped fund Rocket Lawyer -- led the most recent financing round to the tune of $258 million.

Lyft, a donation-based ride service, and Tickengo, an airport transportation company funded by former San Francisco Mayor Willie Brown Jr., would also fall under the new rules.

Some experts question how the state will enforce the proposed regulations on what is expected to be a growing number of ride-sharing vehicles. Because they are privately owned by drivers, the PUC would struggle to identify which vehicles need safety inspections, they said. A piece of the proposed regulations would require that ride-sharing cars must also be marked with a company sign or logo.

But, Attanucci said, "most of these companies are thinking the state will never get around to it."

Many expect there soon will be more cars on the streets to inspect, as entrepreneurs ride Uber's coattails into the industry, creating a larger and more varied collection of ride-sharing services with cutting-edge technology that outpaces regulation.

"There will be more companies," said Daniel Sperling, a professor and founding director of the Institute of Transportation Studies at the UC Davis. "The information tech revolution swept through many industries but barely touched transportation. This is just the leading edge of things we're going to be seeing in the future."

Contact Heather Somerville at 510-208-6413. Follow her at Twitter.com/heathersomervil.